Packager DS Smith shares soar as it improves outlook

Recycled packaging maker DS Smith is the top performer on the FTSE 250 today after saying it expects to beat its own forecasts for the full year even though demand has fallen and its supply chain costs have been inflated by rising waste paper prices.

The shares were up more than 13% at 128.8p even though DS Smith reported pre-tax profits in the first half - six months to 31 October - slipped to £34.7m from £44.1m a year earlier. But the company said a restructuring programme had positioned it well to cope with a tough market and it was cautiously optimistic about coming months.

"Building on a relatively good first half, we now expect to exceed the expectations we had for the full-year at the time we released our pre-close trading statement in October. However, second half performance will be dependant on the level of demand in the new calendar year and the speed of our recovery of the significant cost increases within our supply chain."

But the company cautions that the market remains uncertain and even the traditionally strong pre-Christmas season for the UK box business has seen lower demand that in previous years.

DS Smith has had to raise the prices it charges its cutomers - the bulk of which for boxes are in the fast-moving consumer goods sector of the market - to make up for rising input costs. It says waste paper prices have been rising recently because of increasing demand from the Far East.

According to data from Thomson Reuters, for the year ending April 2010, analysts on average are expecting the company to post a pretax profit of about £46m.